Pearson warns on earnings

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PEARSON warned its earnings would fall sharply again in 2014 as the publisher entered the second year of a restructuring sparked by the deterioration in its main US education market.

The 170-year-old company, which is under new leadership after years of good growth, suffered a tough 2013 and downgraded its outlook twice.

The weaker-than-expected outlook for this year wiped another £700m off its market value in yesterday’s trading, taking the fall in the share price since the beginning of the year to more than 25 per cent.

“This is the biggest restructuring in Pearson’s history and we’re doing it at a time when our biggest business, North America, is facing the most difficult trading conditions it has seen in a decade,” chief executive John Fallon said.

“It is going to pay off and we will start to see it pay off in 2015.”

Jonathan Helliwell, analyst at Edison Investment Research, said: “Results from Pearson have kicked investor hopes of quick recovery into the long grass.”

Pearson, which also owns the Financial Times and a 47 per cent stake in the Random House Penguin book group, for years beat market expectations as it rolled out its education and testing business around the world. But it was hit by a string of managerial changes and slowing growth in 2013.

Mr Fallon took over from the veteran Marjorie Scardino last year and, faced with stalling earnings growth, embarked on a £150m restructuring programme to boost margins and counter tighter educational budgets.

It has been hit particularly in the US where fewer people are enrolling in college courses as the economy recovers.